Articles Tagged with Business interruption

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If you live along the coastline of Louisiana, you are no stranger to hurricane season. Every year residents and business owners try and prepare for hurricane season by securing their properties and following the suggestions and guidelines of authorities. Even with the best preparations, homes and businesses can be severely damaged or destroyed after Mother Nature has her way. When these disasters strike, do you know if you have the right insurance coverage to cover the damages?

If you have a business, you most likely have a general liability insurance policy and possibly a Business Interruption Insurance policy. A Commercial General Liability policy is a type of insurance policy that provides coverage to a business for bodily injury, personal injury, and property damage caused by the business operations, products, or injuries that occur on the business premises. Business Interruption Insurance is insurance coverage that replaces business income lost in a disaster. Business Interruption insurance is usually attached to a property or business owner’s policy, since it cannot be purchased on its own.

In order for a Business Interruption claim to be covered because of hurricane damage several things will have to be proven:

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Was your business closed down or interrupted due to government orders, or from employees or customers being exposed to or diagnosed with Covid-19?

The U.S. department of labor estimates that forty percent of businesses do not reopen after suffering a disaster, and that twenty five percent of the ones that do reopen fail within two years. Most large and approximately forty percent of businesses carry business interruption insurance for times such as this. Business Interruption (BI) insurance is insurance that replaces income lost in the event that business is halted due to a loss or damage. The purpose of business interruption insurance is to do for the business what would have been done for itself. Business Interruption can happen because of multiple reasons such as fire, theft, or other natural disasters which can cause direct physical loss. When these losses occur, most BI policies will cover profits that would have been earned, fixed costs, a new temporary location, commission, training costs, and extra expenses. It would be beneficial to look at the monthly income, tax returns, contracts, leases, bills, and invoices from pre Covid-19 closures, and compare it to after. Your policy may cover most of these costs. Your policy may also cover extra expenses that you didn’t have before, such as extra gloves, masks, and extra cleaning supplies.

The question most business owners are facing now is will their business interruption insurance policy cover losses due to viruses, bacteria, or government ordered closures? The answer here unfortunately is not simple or always clear, it depends on the policy, and how the language of that policy is interpreted. There have already been more than four hundred and fifty lawsuits and dozens of class actions filed since the end of June, 2020. As you can imagine, regardless of the language in each policy, the insurers and the policyholders will be arguing over whether the virus should be covered or not. It is being left up to the interpretation of the courts and the state laws in each state to determine if these businesses will be able to collect on their policies.

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